Where does the web team belong?

By By Don DavisInternet Retailer

With cross-channel initiatives on the rise, determining whether and how to integrate web staff with other staff in a retail organization is key.

When e-commerce was a novelty, it didn’t much matter where the web team fit within a retail chain’s organization chart. But now it matters a great deal, not only because of the growth in online sales but because of mounting evidence that consumers often make their in-store buying decisions based on what they see on the web.

The importance of the web for store success is prompting mandates from the top levels of retail organizations to accelerate cross-channel initiatives, says Jim Okamura, senior partner at consulting firm J.C. Williams Group Ltd. who has been studying organizational issues connected with e-commerce. That in turn forces decisions on how to plan, prioritize, fund, staff, execute and measure programs that require e-commerce specialists to collaborate with their peers in marketing, merchandising, operations and IT.

Will programs like order online for in-store pickup or store kiosks that access a retail web site be more likely to succeed if the e-commerce team is part of a broader organization, such as marketing or store operations? Or should e-commerce remain a standalone unit that assigns specialists to teams established to carry out a specific project?

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“It’s less about how you’re situated in the organization and much more about the conversations you’re having with the rest of the organization and to what degree there is strategic visibility at the CEO level,” says Greg Foglesong, general manager of Home Depot Direct, the e-commerce and catalog arm of The Home Depot Inc.

E-commerce is getting more C-suite visibility as the head of direct-to-consumer marketing increasingly is a member of the senior management team, with compensation tied to the overall success of the company and not just that of the online channel, Okamura says.

While that’s a discernible trend, driven by the growing importance of the web, there remains no agreement on where to place the e-commerce unit within a retail organization. A study last year by Forrester Research and online retailer organization Shop.org showed that 34% of retailers with stores and e-commerce operations organized online as a separate division; 26% put web and catalog in a single unit; 26% put web, catalog and stores in a single unit; and 14% had some other structure.

Okamura, who studied the organizational structure at 30 large multi-channel retailers last year, says the discussion of how to organize e-commerce is still at an early stage in many of those companies. If there is a trend, he says, it is toward at least partial integration of e-commerce teams with personnel focused on stores.

In such a “semi-integrated” structure, for instance, merchandising experts dedicated to the online channel might reside within the merchandising organization, as opposed to in the e-commerce unit. The aim is to provide a more consistent customer experience across channels and to facilitate collaboration between the web team and the stores.

But even initial steps in this direction pose challenges, Okamura says.

A big one is measuring the impact of cross-channel initiatives. How many customers show up at a store because of an online promotion? Or how much did e-mail addresses collected at store checkout counters boost online sales? Measurable results are necessary for a company to assess what works, and to compensate store and online personnel for good work-compensation that encourages them to put their all into future cross-channel efforts.

Another challenge is how to manage the individuals that emerge, usually from the e-commerce team, as bridges to their store counterparts. “Often these people are challenged by having two or more bosses and having to attend twice as many meetings,” Okamura says. Besides stretching them thin, these individuals become so valuable that replacing them is difficult if they leave.

The Wal-Mart approach

Retailers are addressing these issues in different ways. But Okamura says many of the early cross-channel initiatives he’s seen have been driven by teams created to drive through a particular project.

That has been the case at the world’s largest retailer, Wal-Mart Stores Inc., where the e-commerce team that operates Walmart.com is based in northern California, 1,800 miles from company headquarters, and reports to the head of the U.S. store business.

The company executed three major initiatives in 2007 that touched store and web customers-in-store pickup of items ordered online, customer reviews and ratings of items bought in Wal-Mart stores or at Walmart.com, and the “find in store” program that allows web visitors to check the availability of an item in their local stores.

The key to making these initiatives work is a common goal among web and store personnel of making Wal-Mart the best place to shop online and off, says Cathy Halligan, chief marketing officer at Walmart.com.

She says initiatives like these typically come out of annual planning meetings where staff discusses and prioritizes ideas. While the web team proposed customer reviews, she says “find in store” came from the bricks-and-mortar side and in-store pickup, or “site to store” as Wal-Mart calls it, was an idea that came from both.

“Once these ideas are prioritized, primarily within an annual operating plan, we put teams against those,” Halligan says. For instance, the “find in store” program required IT resources to funnel store inventory data to the web site, and required work on the user interface that a site visitor would encounter.

“Our secret sauce is customer focus,” Halligan says. “Be clear on the platforms that deliver customer value and prioritize appropriately. Operating plans are a perfect way to do that.”

A consistent image

Focusing on the customer experience led Home Depot in a different direction in the past year, moving it more toward the “semi-integrated” model Okamura describes. One aspect of that was transferring the merchandisers out of Home Depot Direct and into the merchandising department, Foglesong says.

That move flowed from a growing awareness within the home improvement giant that the web impacts Home Depot customers in ways that go well beyond online sales, and that it is increasingly important for the web and stores to present a consistent image to consumers, he says.